A gap or lapse of auto insurance coverage is something that no one can afford. If you have experienced a gap or you are considering skipping payments to save money and risking a gap, you need to be aware of how an insurance gap affects you.
The team at Legends Insurance can help you with your insurance issues, including finding a more affordable plan that enables you to avoid these costly gaps in coverage. In the insurance world, there are two types of deficiencies: a period without coverage or inadequate coverage. Both are equally detrimental to your financial well-being.
The Dangers of Insurance Gaps
Whether you are swapping insurance policies, buying a new car, or you have not paid this month’s insurance premium, be aware of the risks that come from failing to have adequate insurance coverage. Just some of the risks you may experience include:
- Not Having Enough Coverage to Pay for a Vehicle: When you buy a car, you are presented with the option of “gap” insurance. This insurance bridges the gap between what your insurance policy covers and the loan amount of your vehicle. Auto insurance only covers the “value” of a car, which is often less than what is owed. Therefore, gap coverage will pay for the excess amount; otherwise, you are personally liable.
- Higher Premiums: If you have any lapse in auto, motorcycle or classic car insurance, you may face higher premiums for that period you were uninsured.
- Penalties for No Insurance: All motorists are required to have insurance in Canada; therefore, any gap in coverage could result in a penalty for that lapse. Driving without insurance is an offence under the Criminal Code of Canada, and you could face fines of up to $25,000 for a first-time offence and up to $50,000 for subsequent offences. Furthermore, you could lose your license for up to one year. Therefore, a gap in insurance coverage puts your future at risk.
- You Could be Denied Future Coverage: Depending on the length of your insurance gap, some insurance companies may deny you coverage. In addition, you could be labeled as high-risk by those willing to take you on, which means much higher premiums than just continuing and paying for your old policy.
- Personally Liable for Damages: During your gaps in coverage, you would be personally liable for any accident damages caused by you. That includes your medical costs, property damage, and injuries to other parties.
How to Avoid Insurance Gaps
Avoiding insurance gaps is relatively easy. First, always pay your premium and if you cannot pay the premium, contact the insurance company or your broker for alternatives. Make sure you follow all policy requirements from your insurance company, such as proof of registration, notifying them of an accident, and so forth.
If you no longer need auto insurance because you are driving a company car, get a proof of insurance card from your old policy. That way if you need to purchase automobile insurance in the future, you can show that your vehicle was covered until it was no longer needed.